Swiss National Bank

September 14, 2017

After the September quarterly review of monetary policy, Swiss central bank authorities did not change their policy stance, slightly boosted projected inflation, cut the 2017 growth forecast to under 1% from 1.5%, and reiterated a commitment to a sub-zero interest rate and occasional foreign exchange intervention as needed to keep upward pressure on the franc in check. A released statement observes that the franc rose against the dollar but fell against the euro over the past three month, alleviating some but not all of the currency’s over-valuations.

The Swiss franc nevertheless remains highly valued, and the situation on the foreign exchange market is still fragile. The negative interest rate and the SNB’s willingness to intervene in the foreign exchange market as necessary therefore remain essential in order to reduce the attractiveness of Swiss franc investments and thus ease pressure on the currency.

Since lifting a ceiling on the franc of 1.2000 per euro in January 2015 and simultaneously cutting the sight deposit rate target to -0.75%, policy parameters have not been changed. Although the protest against excessive franc strength was muted a bit, this should not necessarily be inferred to mean that the sight deposit rate is about to be raised. Assuming that the sight deposit stays at minus 0.75%, CPI inflation is conditionally projected to bottom in 1Q18 at 0.2% and thereafter rise to 0.6% by late 2018 and 1.4% by late 2019. Only in 2020 would such rise above 1.5%.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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